Is the Relief Rally Running Out of Gas?

POSTED BY: VANCE HOWARD

The market is in a downtrend, and investors should be managing risk accordingly. Last week the market put in a strong relief rally, and so far, it is holding. We believe that we are reaching a point of resistance. This makes me wonder if it is a buy the rumor, sell the news situation. What I mean by that is the rumor is a ceasefire, and the news is agreement between the two counties. Either way, we think the market is moving up or down on the next headline news about the Iran war.

I still find it difficult to call for a move back to new highs right away and think the weeks ahead could still prove volatile. However, it’s important to take note of the progress happening in indices around the globe. We think the probability is still high that we could get a re-test of the March lows.

Oil soared, and stocks opened lower after President Trump’s speech to the nation Wednesday night failed to include details of an imminent end to the conflict. In fact, it stoked fears that there could be further escalation.

The U.S. will hit Iran “extremely hard” over the next two to three weeks, he said, and threatened to bomb its energy infrastructure if Tehran doesn’t make a “deal.” He also called on other countries to secure safe passage for vessels in the Strait of Hormuz.

Separately, initial jobless claims unexpectedly dropped to 202,000 vs. the prior week’s upwardly revised total of 211,000. This was firmly below expectations of 213,000, according to Econoday.